Noranda Still Might Get Rate Reduction

Aug 11, 2014

JEFFERSON CITY, Mo. — Noranda, an aluminum smelter based in New Madrid, is the largest employer in Southeast Missouri with over 888 employees. Located in the St. Jude Industrial Park, the plant covers over 3000 acres with more than 40 acres under roof. Electricity is one-third of all operational expenses for Noranda; last year they paid Ameren $160,000,000 for electricity. Ameren’s rate to Noranda has increased by 40% since 2007, and more than $44M since 2009.

Noranda requested the Public Service Commission to reduce their electric rate from Ameren stating that without a reduction it would be difficult for them to keep the factory open. There’s been an epidemic of aluminum smelter shutdowns over the recent years as 32 smelters have been reduced to only 9 smelters remaining in the U.S. Electricity costs have been cited as the reason for shutdown in almost every case.

Rep. Shelley Keeney
“I agree with them that Ameren’s customers are better served with Noranda on their system. The entire bootheel region must be relieved that Noranda will remain in business. Not to mention the 850 employees being able to continue working and raising families in the bootheel.” — Rep. Shelley Keeney (156th)
The economic impact if Noranda were to leave our region has been calculated to be more than 3900 jobs. Numbers like these are what prompted five county officials to write a letter to the Public Service Commission (PSC) in support of the proposal, because without Noranda it is “difficult to perceive” what the area would become. The letter stated that if Noranda closed it would mean, “900 jobs that cannot be replaced and will never come back if lost.”

Senator Libla, in his attempt to convey how important Noranda was to the counties he represents said, “I have tried to fathom what the economy of the Bootheel would look like without Noranda. Basically it would be like St. Louis losing the Cardinals, Boeing, Anheuser- Busch, Monsanto, and Express Scripts all at once.”

Recently, the Missouri Office of Public Counsel (OPC) filed a stipulation recommending Noranda Aluminum receive rate relief totaling 60 percent of their original request. The filing came one day after five Public Service Commissioners indicated that they were unwilling to grant Noranda the entirety of their request.

The Missouri OPC, which represents the interests of the public and utility customers in PSC proceedings, formally offered a stipulation to the PSC reducing the plant’s base electricity rate from $37.94 MWH (megawatts per hour) to $34.44 MWH and requiring the plant to refund any of the savings gained if the plant engages in layoffs in the first year, or drastically reduces its full time workforce.

The OPC recommendation states that Noranda’s closure in New Madrid would negatively impact consumers across the state.

One portion of the stipulation reads, “Further, OPC offers this stipulation because closure of Noranda’s New Madrid smelter would result in Ameren Missouri’s ratepayers being worse off than if the Commission ordered this stipulation to take effect, in that the remaining ratepayers are then at risk to pay materially more in their base electric rates and in their fuel adjustment charges, and the primary and secondary economic effects of Noranda’s closure would be felt throughout the economy of the State, particularly in Southeast Missouri.”

The stipulation would prevent layoffs of Noranda’s workforce for at least one year and require the smelter to retain a minimum workforce of 850 full-time employees. The stipulation agreement also contains “clawback” provisions — requiring Noranda to refund money to the state if they do not meet the conditions outlined.

The OPC also changes the way the Fuel Adjustment Charge (FAC) is calculated for the smelting operation.

Noranda will have no FAC in the first year under the new terms outlined by the OPC, with an adjusted FAC of just 25 percent of what it would have paid in the second year. The FAC subsequently would increase 25 percent every year until reaching 100 percent in the 5th year Noranda’s new reduced base rate is in effect.

The OPC document also made a point of agreeing with a key portion of Noranda’s original complaint, citing it in the document. The OPC states that Noranda’s closing “would be a tragedy for the 888 families who are supported by the stable and dependable employment offered by Noranda, and also a tragedy for the families whose livelihoods depend on the business supported by Noranda. Thus, this result would cause significant economic harm to the State of Missouri and to Ameren Missouri’s other customers.”

The agreement would also place strict stipulations on Noranda’s to invest “$35 million in capital into its operations at the New Madrid smelter in the first year its reduced rate is in effect.”

Rep. Shelley Keeney, a member of Republican leadership, said she supported the OPC stipulation. “I was pleased to learn about the breakthrough with the Office of Public Counsel today,” Keeney said. “The OPC is a great defender of the public’s interest and I agree with them that Ameren’s customers are better served with Noranda on their system. The entire bootheel region must be relieved that Noranda will remain in business. Not to mention the 850 employees being able to continue working and raising families in the bootheel.”

Ameren and Noranda have been locked into a heated public battle for months over whether or not to make changes to the rates of the massive smelting operation in New Madrid. The PSC’s final decision can come at any time.

SEMO TIMES will continue to follow this story for updates as it develops.